The artificial intelligence (AI) market has been and continues to be active, after hitting record deal numbers last year, and is only expected to continue as competition for talent and innovative technology increases.
What do you need to know about transactions that implicate this technology? Deals in the space require specialized due diligence and an appreciation for the complex issues that can arise, especially with companies that operate in regulated industries. Investors and acquirers should be cognizant of both the risks and the opportunities in these types of transactions, especially as the space and related regulation continue to develop.
Additionally, when engaging in transactions involving AI technologies, it is important to keep the following in mind:
- While many of the issues overlap with those that arise in software and SaaS company deals, those involving AI have some key differences and heightened risks in certain areas.
- Proliferation of AI “enabled” or “enhanced” products/services means that these issues are seen not only in companies developing AI solutions, but also where a non-AI-focused company implements AI-powered solutions or applications or integrates AI tools into its workflow or infrastructure.
- The existing legal paradigms may be difficult to apply to these novel technologies and result in a level of uncertainty and unpredictability with which outside counsel can assist.
- Participants in the space need to understand the legal issues and risks AI raises in their transactions, especially as
- companies continue to innovate and the technology continues to develop;
- lawmakers and regulators seek to address concerns raised by the technology; and
- companies continue to deploy and implement AI-powered solutions.
- Diligence of AI deals is best performed with an integrated technical and commercial diligence team. Ethical use of AI, the prevalence of university technology in AI acquisitions, and the importance of the underlying data used to train AI systems are frequent aspects of AI deals that need to be addressed in diligence.
This presentation was part of the AI Bootcamp series. We invite you to subscribe to Morgan Lewis publications to receive updates on trends, legal developments, and other relevant areas.